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ENTREPRENEURSHIP IN AN ACADEMIC ENVIRONMENTNalaka Gooneratne, MD, MSCE, ABSMJune 12, 2018
Overview
Background Academic Resources/Limitations Financial Considerations Conflict of Interest Intrapreneurship
Sally and Pat and their nanoparticles
Co-inventors of patented radiation-absorbing nanoparticles.
Sally (tenured professor) and Pat (post-doc) Would like to spin-out their IP in a start-up that
would conduct Phase 1 clinical trials related to chemotherapy applications.
Innovation in Academia
Academic Investigation
Start-up Business
Intellectual Property
Overlapping Interests
Academic Investigation
Start-up Business
Intellectual Property
BA
DC
Moving from idea to final product
Effort Allocation
Prototype
Intellectual Property
Development Partner
Funding
Overview
Background Academic Resources/Limitations Financial Considerations Conflict of Interest Intrapreneurship
PCI: Penn Center for Innovation
Technology Transfer Office + Incubator Bridge between Penn faculty and the business
community Technology Transfer Role
Plays a central role for filing intellectual property Also fulfills an arbitration role in case of disagreements
between co-inventors
PCI Ventures
PCI Incubator Programs develop a strategy around company formation Functions primarily as an incubator for start-up
companies UPSTART: 49% equity UPAdvisors: 8-12% equity
CHOP Resources
Office of Technology Transfer Office of Entrepreneurship and Innovation
Penn Medicine Center for Healthcare Innovation (PMCHI)
Partnership between UPHS and the Leonard Davis Institutes Center for Health Incentives and Behavioral Economics Director: David Asch. Co-directors: Kevin Volpp, Kevin
Mahoney. Chief Innovation Officer: Roy Rosin.
Penn Medicine Center for Healthcare Innovation (PMCHI)
Office of Clinical Research
Broad range of expertise FDA IND/IDE guidance Research budgets/contracts Research staff training Clinical Trial Management System
(PennCTMS)
Wharton Collaboration
Expertise in teaching/research Mack Center for Technological Innovation Snider Entrepreneurial Research Center
Funding/Advice Venture Initiation Program Wharton Small Business Development Center
Alumni network Graduate/undergraduate students
School of Law
Detkin Clinic IP clinic Entrepreneurship clinic Model: Teaches a small group in a seminar for 3rd years to provide
client experience. IP clinic: 9 different subject matter areas. Semester classneeds clients in Aug and Dec (before the
start of the semester)
School of Law: Resources
School of Engineering
Department of Bioengineering Penn HealthTech
Partnership between School of Medicine and School of Engineering
PRECISE Center Weiss Tech House
School of Veterinary Medicine
Animal testing core Faculty interested in IND enabling studies--could be
done under an enabling contract as a core service Currently 80% of their work is industry-related.
Thomas Schaer, VMD Director of Translational Research in Orthopedic
Surgery
Clinical and Translational Science Award
CTSA grant from the NIH Based in the Institute for Translational Medicine and
Therapeutics (ITMAT) Commercialization and Entrepreneurship in Translation
(CAET) Center for Human Phenomic Science (CHPS)
Can serve as a site to conduct research
CTSA: Major components
Support for clinical research Built on the infrastructure of the GCRC
Education Masters/Certificate in Translational Research programs Training grants for pre-doc/post-doc staff
Funds Approximately 55 million dollars Supports over 45 staff, assisting in over 200 research
studies at Penn and CHOP
CHPS Servicesthe 4 Ps
Plan: Study design support for the principal investigatorBiostatistical support
Place: Infrastructure for the research participant-research staff interaction In-patient/Out-patient roomsNursing support
Process: Assist with specimen processing and analysis
Pilots: Support pilot research via ITMAT grants
PresenterPresentation NotesAdd color and design
In-patient Rooms for Research
Located on 1 Dulles
Cor
ridor
that
con
nect
s G
ates
to R
avdi
n an
d ru
ns p
aral
lel t
o Sp
ruce
Str
eet
Gates Pavilion Entrance
Ravdin Main Entrance
Out-Patient SuitePresbyterian (1 Mutch)
PresenterPresentation NotesApproximately 100,000 sq feet of useable space.
Early Phase Clinical Trials Unit
Clinical Core Services
Clinical research space Telemetry beds
Research nursing16 full-time nursing staff trained in research nursing Full-time nurse practitioner Chemotherapy/ACLS trainedCan access Hickman/central lines/dialysis
cathetersAble to do frequent blood sampling (up to every
10 minutes) for pharmacokinetic studies, clamps, etc.
PresenterPresentation NotesAdd color and design
Clinical Core Services
Clinical research space Research nursing Study Design and Biostatistics (SDAB) Nutritional assessment core Behavioral neuroscience core (CHOP) mHealth Service Exercise Interventions Cardiovascular Phenotyping Investigational Drug Service (IDS)
Procurement/storage of study drugs Randomization of study subjects
PresenterPresentation NotesAdd color and design
Research Example
Test nanoparticle pharmacokinetic profileA Phase 1 study to assess PK properties in
preparation for a possible IND Plan:
Meet with CTRC biostatistician to plan basic elements of study (approx 10 hoursadditional time may require payment)
Protocol review by the joint IRB/CTRC Council as part of approval process
Research Example
Place: Provide a location where research
participants can come to have blood specimens collected by nursing staff
IDS can assist with randomizing subjects to different doses of the nanoparicles
Research Example
Pilot:Study could be funded by an ITMAT pilot
grant Up to 100,000 in some cases
Process: Staff at the CHPS can help aliquot blood
specimens for storage
Penns Institutional Limitations
Promotion process: patents vs manuscripts/grants Protected time for new technology development Purchasing supplies and equipment
May require working with non-approved vendors
Penns reputation within the business community as a challenging partner Slow contract approval process
Limited mentorship for academic entrepreneurs Limited support for later phases of development
Areas of Limited Support
Overview
Background Academic Resources/Limitations Financial Considerations Conflict of Interest Intrapreneurship
Financial Return
Academic Investigation
Start-up Business
Intellectual Property
Publication currency
Equity (shares)Licensing Revenue (royalties)
Financial Considerations
Revenue disbursement from intellectual property is governed by Penns Patent policy
Average industry patent royalty rate of 7.0% on gross income from invention Based on Licensing Economics Review (2002) review of
458 license agreements Range extended from 0% to 50%
Wikipedia, Royalties, accessed Jan 2013. Taken from The Royalty Rate Journal of Intellectual Property, December 2002, p. 8.
Patent Royalty Rates: Pharmaceutical
The following are prevalent rates for gross sales within the United States pharmaceutical industry: a pending patent on a strong business plan, royalties of
the order of 1% issued patent, 1%+ to 2% the pharmaceutical with pre-clinical testing, 23% with clinical trials, 34% proven drug with US FDA approval, 57% drug with market share, 810%
Wikipedia, Royalties, accessed January, 2013. Adapted from http://www.cptech.org/ip/health/royalties/
Patent Royalty Rates (cont.)
For our calculations, we will assume the conservative average licensing rate of about 4%
Estimated Disbursement
Percentages from Patent Policy Actual Dollar amounts
Total License revenues $100,000
Unreimbursed PCI IP costs 10 $10,000
Adjusted PCI Revenue 90 $90,000
Inventor's share 30 27 $27,000
Inventor's research allocation 12.5 11 $11,250
University share 57.5 52 $51,750
PCI operating costs (estimated at 10%) 10 5 $5,175
Net PCI income 90 47 $46,575
Department share 40 19 $18,630
School share 40 19 $18,630
University share 20 9 $9,315
Yearly licensing revenue: $100,000 profit at 4% royalty rate-->$4,000
Chart1
4000400040004000
University
PCI
Research Fund
Inventors
1225
2000
250
525
Sheet1
UniversityPCIResearch FundInventorsUniversityCTTResearchInventors
4,0001,2252,000250525100,0004,0001,2252,000250525
1 million18,25310,2003,7257,8231,000,00040,00018,25310,2003,7257,823
10 million237,65012,00048,500101,85010,000,000400,000237,65012,00048,500101,850
100 million2,431,62530,000496,2501,042,125100,000,0004,000,0002,431,62530,000496,2501,042,125
To resize chart data range, drag lower right corner of range.
Yearly Revenue: 1 million at 4%
Chart1
40000400004000040000
University
PCI
Research Fund
Inventors
18252.5
10200
3725
7822.5
Sheet1
UniversityPCIResearch FundInventorsUniversityCTTResearchInventors
40,00018,25310,2003,7257,8231,000,00040,00018,25310,2003,7257,823
1 million18,25310,2003,7257,8231,000,00040,00018,25310,2003,7257,823
10 million237,65012,00048,500101,85010,000,000400,000237,65012,00048,500101,850
100 million2,431,62530,000496,2501,042,125100,000,0004,000,0002,431,62530,000496,2501,042,125
To resize chart data range, drag lower right corner of range.
Yearly Revenue: 5 million at 4%
Chart1
200000200000200000200000
University
PCI
Research Fund
Inventors
115762.5
11000
23625
49612.5
Sheet1
UniversityPCIResearch FundInventorsUniversityCTTResearchInventors
200,000115,76311,00023,62549,6135,000,000200,000115,76311,00023,62549,613
18,25310,2003,7257,8231,000,00040,00018,25310,2003,7257,823
10 million237,65012,00048,500101,85010,000,000400,000237,65012,00048,500101,850
100 million2,431,62530,000496,2501,042,125100,000,0004,000,0002,431,62530,000496,2501,042,125
0000
To resize chart data range, drag lower right corner of range.
Yearly Revenue: 10 million at 4%
Chart1
400000400000400000400000
University
PCI
Research Fund
Inventors
237650
12000
48500
101850
Sheet1
UniversityPCIResearch FundInventorsUniversityCTTResearchInventors
400,000237,65012,00048,500101,85010,000,000400,000237,65012,00048,500101,850
18,25310,2003,7257,8231,000,00040,00018,25310,2003,7257,823
10 million237,65012,00048,500101,85010,000,000400,000237,65012,00048,500101,850
100 million2,431,62530,000496,2501,042,125100,000,0004,000,0002,431,62530,000496,2501,042,125
0000
To resize chart data range, drag lower right corner of range.
Yearly Revenue: 100 million at 4%
Chart1
4000000400000040000004000000
University
PCI
Research Fund
Inventors
2431625
30000
496250
1042125
Sheet1
UniversityPCIResearch FundInventorsUniversityCTTResearchInventors
4,000,0002,431,62530,000496,2501,042,125100,000,0004,000,0002,431,62530,000496,2501,042,125
1 million18,25310,2003,7257,8231,000,00040,00018,25310,2003,7257,823
10 million237,65012,00048,500101,85010,000,000400,000237,65012,00048,500101,850
100 million2,431,62530,000496,2501,042,125100,000,0004,000,0002,431,62530,000496,2501,042,125
To resize chart data range, drag lower right corner of range.
Yearly Revenue: R01
Total revenue is directs (500k)+ indirects (310k)
Chart1
500000500000500000500000
University
PCI
Research Fund
PI+Co-I
310000
410000
90000
Sheet1
UniversityPCIResearch FundPI+Co-IUniversityCTTResearchInventors
500,000310,000410,00090,000100,000,0004,000,0002,431,62530,000496,2501,042,125
1 million18,25310,2003,7257,8231,000,00040,00018,25310,2003,7257,823
10 million237,65012,00048,500101,85010,000,000400,000237,65012,00048,500101,850
100 million2,431,62530,000496,2501,042,125100,000,0004,000,0002,431,62530,000496,2501,042,125
To resize chart data range, drag lower right corner of range.
Workload (hours)
Assumes approximately a 20% success rate Up to 5
submissions for successful grant funding
Approx. 20% of patents lead to viable products
Chart1
R01 GrantR01 GrantR01 GrantR01 Grant
InventionInventionInventionInvention
Grant
Study
Licensing
Patent
1000
800
750
1000
375
250
Sheet1
GrantStudyLicensingPatent
R01 Grant1,000800
Invention7501,000375250
To resize chart data range, drag lower right corner of range.
Start-up Business
The inventor may also decide to start a business to monetize their patent Very difficult to predict inventor revenue in this case
due to large variability across start-ups Generally first few years are sweat equity:
uncompensated Possibility of salary support once VC support obtained
(likely after year 2) Possibility of large payout once start-up venture is
bought out or goes public (rare, but may occur after year 5)
Equity Allocation
Equity (ownership) allocated by privately-held shares UPSTART Model: 100,000 shares awarded in 1,000
share increments across all co-owners Additional shares added with new co-owners which dilute
existing owners
Friendly split: 49.5/50.5, or 33/32/32 model
Academic Roles in a Start-up
Co-Founder Penn discourages having a fiduciary role: C-suite,
Board of Directors Must be less than 50% co-owner (i.e.,
Start-up: IP considerations
Penns Patent Policy gives PCI the right to remove the inventor from the patent if the inventor is a co-founder with equity in a start-up (unlikely)
The inventors start-up may not necessarily be awarded the inventors patent by PCI (unlikely)
The license fees are set by PCI and may be prohibitive
Federal Small Business Funding: SBIR/STTR
Stimulate technological innovation; Meet federal research and development needs; Increase private sector commercialization of
innovations developed through federal R&D funding; and
Foster and encourage participation in innovation and entrepreneurship by socially and economically disadvantaged persons and women-owned small businesses.
Phase 1
Goal: Demonstrate Feasibility and Proof of Concept Aims generally include: 1) Focus group; 2) Prototype
development; 3) Small pilot (n=10/20, open-label)
Establish technical merit and commercial potential Max of 225,000 over 6 months (SBIR) or 12 months
(STTR) 6 page research plan
Phase 2
Goal: Research and Development Aims generally include 1) Additional technology
development and 2) Larger clinical trail (n>50, randomized)
Contingent upon a successful Phase 1 Generally 1 million over 2 years 12 page research plan + 12 page
commercialization plan
SBIR/STTR: Pros
No loss of equity No loss of control (except with company
partner/academic partner) Even if not funded, provides an opportunity to
further develop business model and consultants A type of federal grant (NIH, NSF or DoD) with
opportunity for University indirects Approximately double the funding rate of typical
NIH grants Projects funded tend to be practical/commercial
SBIR/STTR: Cons
Delays: Minimum of 1 year and up to 2 years to get funding
Paperwork: Multiple registrations Effort: NIH grants are 90-200 pages long
NIH grants typically require approximately 100-200 hours
Requires dedicated expertise Consultants available: $15-30k
Uncertain funding/review prospects Can apply to multiple VCs but there is only one NIH Inconsistent reviews
Academic Perspective: What is the right time for an SBIR/STTR?
SBIR STTR P1/Internal Pilot
Scientific conceptTeam expertiseSignificance or commercial potential
Foundation/R03/R21
Preliminary dataHypothesis driven with mechanism / model
R01/Program Project
Team with national recognized expertiseExtensive preliminary dataScientific innovation
Overview
Background Development Timeline Academic Resources/Limitations Financial Considerations Conflict of Interest Intrapreneurship
Understanding the terms
Significant Financial Interest (SFI) >5,000k in payments/equity from an Outside
organization Income from IP rights not assigned to Penn Any Clinical trial intellectual property, whether or not
assigned to Penn Any Fiduciary Role for an Outside organization
Financial Conflict of Interest (FCOI) An SFI that could influence design/conduct/reporting of
a study FCOI does not automatically mean research misconduct
What do I need to do?
University-wide systems: PHS-FITS: Federal reporting as part of grant
submissions. 5 min
FIDES: SFI disclosure site. 60+ min
What do I need to do?
School of Medicine system: Extramural Activities: Reports all consulting, sponsored
travel, etc. Part of our general faculty disclosure requirements for the University. 5 min. Requests date you discussed with your chair
There can be cross talk between the systems
FCOI and Exceeds
Thresholds
FCOI Possible
Review
Grant Submission SFI
Univ: PHS-FITS
FIDES
CISC: Management
Plan
SoM: Extramural
CISC Management Options
Public disclosure of financial conflicts of interest Disclosure of financial conflicts of interest directly to
participants Appointment of an independent monitor Modification of the research plan Change of personnel, responsibilities, or removal from
participation in all or a portion of the research Reduction or elimination of the financial interest (e.g., sale of
an equity interest) or Severance of relationships that create financial conflicts.
What does this mean for me?
Important to think strategically when deciding when to file IP or create SFI. Ramifications for: Research funding Research activities Presentations/publications
Choices, choices
1. Partner with an existing company2. Create a new start-up company in which they own equity3. Create a new start-up company; the start-up licenses the IP from Penn (which owns the IP Sally and Pat invented).4. Step back and continue sponsored research work with their nanoparticle IP
Overview
Background Academic Resources/Limitations Financial Considerations Conflict of Interest Intrapreneurship
Intrapreneurship vs Entrepreneurship
Characteristic Intrapreneurship Entrepreneurship
Partners Internal Externaloutside entitiesTimeline Rapid Generally slowerCOI Variable; rarely FCOI Complex; often FCOIIP Provisional/ Disclosure FormalizedScope Workflow, clinical,
research, commercialization
Research, commercialization
Risk Generally low Generally high
Academic Career Ramifications of Intrapreneurship
Utility in terms of CV/promotion depends upon track Tenure track: Minimal utility CE/AC/HS: Potential utility
Tends to be reflected in terms of: Research grants: Intrapreneurship collaborations can blossom
into research partnerships (tenure/CE) Clinical initiatives: Helping to establish a new clinical center CQI initiatives: May become abstracts/papers Can also be useful for Maintenance of Certification (MOP)
requirements
Personal empowerment
Innovation Centers
School/University/Health System Existing Innovation Centers Engagement with established Innovation Center
programs as a consultant/advisor
Establishing your own Innovation Center within your Division/Department Opportunity to create a unique niche for yourself value-add that may get your proximate chair to
advocate more strongly for your retention and career advancement
Ex: Sleep Innovation Program in the Division of Sleep Medicine
Conclusion
Several resources available at Penn Proof of concept prototype, patent
Key areas where limited support available Design prototypes, licensing, funding
Important to accurately consider financial ramifications, COI and timeline
Intrapreneurship is an underappreciated opportunity that can facilitate later external entrepreneurship
Entrepreneurship in an Academic EnvironmentOverviewSally and Pat and their nanoparticlesInnovation in AcademiaOverlapping InterestsMoving from idea to final productEffort AllocationPrototypeIntellectual PropertyDevelopment PartnerFundingOverviewSlide Number 13PCI: Penn Center for InnovationPCI VenturesCHOP ResourcesPenn Medicine Center for Healthcare Innovation (PMCHI)Penn Medicine Center for Healthcare Innovation (PMCHI)Office of Clinical ResearchWharton CollaborationSchool of LawSchool of Law: ResourcesSchool of EngineeringSchool of Veterinary MedicineClinical and Translational Science AwardCTSA: Major componentsSlide Number 27Slide Number 28CHPS Servicesthe 4 PsIn-patient Rooms for ResearchOut-Patient SuitePresbyterian (1 Mutch)Early Phase Clinical Trials Unit Clinical Core Services Clinical Core ServicesSlide Number 35Slide Number 36Research Example Research Example Research Example Slide Number 40Penns Institutional Limitations Areas of Limited SupportOverviewFinancial ReturnFinancial ConsiderationsPatent Royalty Rates: PharmaceuticalPatent Royalty Rates (cont.)Estimated DisbursementYearly licensing revenue: $100,000 profit at 4% royalty rate-->$4,000Yearly Revenue: 1 million at 4%Yearly Revenue: 5 million at 4%Yearly Revenue: 10 million at 4%Yearly Revenue: 100 million at 4%Yearly Revenue: R01Workload (hours)Start-up BusinessEquity AllocationAcademic Roles in a Start-upStart-up: IP considerationsFederal Small Business Funding: SBIR/STTRPhase 1Phase 2SBIR/STTR: ProsSBIR/STTR: ConsAcademic Perspective: What is the right time for an SBIR/STTR?OverviewUnderstanding the termsWhat do I need to do?What do I need to do?Slide Number 70CISC Management OptionsWhat does this mean for me?Choices, choicesOverviewIntrapreneurship vs EntrepreneurshipAcademic Career Ramifications of IntrapreneurshipInnovation CentersConclusion